Following the New York Stock Exchange's plan to extend U.S. stock trading hours, on October 28th, the central bank dropped another bombshell announcement, officially launching outright repurchase agreements in addition to reverse repos and government bond trading.

Repurchase and reverse repurchase are methods of the central bank's open market operations. What is different about the outright repurchase agreement now, and why do many people consider it a nuclear-level positive?

On the morning of the 29th, after A-shares surged, they turned around and sold off, and continued to increase in volume. Why did this trend occur despite multiple positives?

Central bank support?

Recently, there have been too many ups and downs in the market. However, a very clear change recently is that the market is no longer blindly bearish on A-shares and suppressing A-shares, or rather, investors are no longer swayed by every rumor about A-shares.

To some extent, this is also a positive for the development of A-shares.

Back to the main point, on October 28th, the central bank once again released a message, officially implementing outright repurchase agreements in the open market.

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Once this news came out, the market boiled again.

So, compared with traditional reverse repurchase, what is different about the outright repurchase agreement?

In terms of traditional reverse repurchase and outright repurchase agreement, their original intention is to inject liquidity into the market.However, the central bank did not simply throw money at financial institutions but used a clever method—"borrowing" to achieve this goal.

Specifically, the central bank would approach those primary dealers, purchase their valuable securities, and then agree on a time with them. When that time comes, these primary dealers would repurchase the previously sold valuable securities.

In this process, it is the familiar reverse repo.

The biggest difference between a buy-and-hold reverse repo and a standard reverse repo is that in a reverse repo, the party holding the securities does not have the right to deal with these assets, such as reselling them. However, in a buy-and-hold reverse repo, this right has been bought out.

This means that in the event of a default, this approach helps to alleviate the pressure on financial institutions' overall liquidity due to the freezing of pledged collateral, making interbank fund circulation smoother, safer, and more globally oriented.

In addition, the buy-and-hold reverse repo is very useful for improving our country's ability to adjust liquidity across time periods within the next 12 months.

Our country still has many monetary policy tools that can be used to release liquidity, such as 7-day open market reverse repo operations and 1-year medium-term lending facilities (MLF), in addition to those that can inject long-term liquidity through government bond purchases and reductions in reserve requirement ratios.

Previously, in our monetary policy package, the short-term liquidity injection tools for the 1-month to 1-year period were somewhat insufficient.

Now that this move has been made, we can more flexibly adjust the fund flow within one year.

The maximum term for a buy-and-hold reverse repo is one year.If estimated correctly, it should be able to cover terms such as three months and six months, which would definitely improve the precision in managing the liquidity of funds.

More crucially, what if financial institutions really don't have the money to repay when due? Although the cost of default is currently unknown, what can the central bank do if they can't pay back?

Moreover, this time the target even includes local government bonds. If there is a default, isn't it equivalent to the central bank underwriting these debts?

This signal seems to suggest that you can go all out, and the central bank will clean up after you.

The next stop is 4,000 points?

Therefore, many people regard it as a nuclear bomb-level good news.

Since the Federal Reserve cut interest rates, China has perfectly linked interest rate cuts with policy measures to boost the stock market. Up to now, in the A-share market, many investors have seen the country's determination to win this decisive battle in the stock market.

Whether it's the national team buying stocks or the introduction of multiple favorable policies.

Now, the next policy benefit for A-shares should be at the meeting between November 4th and 8th, when the U.S. election results are settled, and the news of the Federal Reserve's interest rate cut becomes clear. At that time, it may be when the Chinese stock market responds to the moves.

Yesterday's closing, A-shares stood on 3,300 points as expected.In the fluctuating stock market, initially, everyone felt that there might be a significant downturn. As time passed, some investors began to speculate whether this trend was to fill some gaps left over from the past.

Subsequently, a sense of panic permeated the market, with everyone guessing whether it would break through the crucial level of 3000 points. At this moment, some investors began to change their thinking, starting to accept that this fluctuation was merely a short-term rebound.

However, as the market gradually stabilized, more investors began to accept and recognize this slow upward trend, and some even started looking forward to the recapture of 3300 points.

Obviously, many people's views have spontaneously unfolded, and they have begun to harbor bullish thoughts deep inside.

Different from the past, this time at 3300 points, according to the usual inertia, almost all would result in a dive, especially around 3300 points. But this time, the overall market trend is very different from before, with the enthusiasm of the bulls already clearly overflowing.

Secondly, in people's thinking, to capture the market's integer points, it often requires the help of large financial institutions to fan the flames and heat up the atmosphere.

However, yesterday, the banking and insurance industries seemed a bit subdued, and the securities industry was just fluctuating up and down without any significant moves. It was the small-cap stocks that took the lead, relying on their market enthusiasm to maintain the bullish sentiment in the stock market.

When the stock market no longer relies on heavyweight stocks to break through pressure points, does this mean that the current stock market's risk tolerance has increased?

And doesn't it also indicate that our current market investors have considerable confidence in the future?

Out of 4200 stocks, as of last Saturday, more than 1600 listed companies in our Chinese stock market have submitted their financial reports for the first three quarters of this year, with more than 40% of these companies' parent companies earning higher net profits in the first nine months of this year compared to the same period last year.Moreover, more than 30% of companies have seen an increase in net profits earned by their parent companies in the last month of this quarter, which is the third quarter, compared to the previous quarter.

On the morning of the 29th, despite multiple positive factors supporting the market, the A-shares suddenly fell, likely as a preemptive response to the upcoming U.S. elections.

In addition to this, the offshore renminbi (RMB) plummeted significantly around 10 a.m., breaking the recent pattern of fluctuation. The depreciation of the RMB implies the strengthening of the U.S. dollar, which has an inverse relationship with the Chinese stock market.

As for the reason behind the weakening of the RMB, it is highly likely related to the U.S. non-farm payroll data, which directly impacts the interest rate decision in November. The current expectation is for a 25 basis point rate cut. Should the U.S. pause its interest rate hikes, it would have a significant impact on global U.S. dollar liquidity.